Strict New Russian Budget Appeases Western Donors

By
Justin Burke, Special to The Christian Science Monitor /
January 27, 1992

MOSCOW

THE Russian government has emerged victorious in the battle for an austere first quarter budget, but it still faces a tough fight to win the war over implementation of market-style reforms.

The Russian parliament on Friday passed a law giving the government control of the budget - previously the responsibility of the legislature. According to the government's plan for the first three months of 1992, the budget will be balanced with spending limited to 420.5 billion rubles (roughly $4 billion). Some legislators criticized the budget, saying not enough spending was planned on agriculture and social welfare.

The deepest spending cuts in the first quarter will come from the defense sector, which is due to receive 50 billion rubles, (about $450 million), or about 4.5 percent of the Russian gross national product. Military spending comprised about 20 percent of the 1991 budget.

Last year Russia ran up an estimated 108.4 billion ruble deficit (about $1 billion) as it tried to cover rising costs during a period of economic collapse and skyrocketing inflation. Russian Deputy Prime Minister Yegor Gaidar said the austerity measures were needed to ensure the continued economic help of the West, seen as an essential component to a successful transition to a market economy.

On Saturday Russia received some good economic news from the West. Finance ministers from the Group of Seven industrialized nations called on the International Monetary Fund to grant membership to some of the former Soviet republics, a step that could lead to new development loans for the Commonwealth of Independent States.

But the G-7 nations declined to set up a ruble stabilization fund. Russian President Boris Yeltsin had appealed to the West to create such a fund, saying the weak ruble was fueling inflation and threatening his government's market- style reform program. However, the majority of G-7 finance ministers felt the Russian government must do more to control spending before a stabilization fund could work, said British Chancellor of the Exchequer Norman Lamont.

While an austere Russian budget may please the West, it is unlikely to have a calming affect domestically. Mr. Gaidar said the spending cuts, coupled with predicted 400 percent inflation, could raise social tension to dangerous levels during the first quarter.

Yevgeny Makarov, chairman of the St. Petersburg regional trade union federation, warned "uncontrolled social conflict" could hit Russia's second largest city by mid-February if prevailing trends are not reversed, according to the official Tass news agency.

The economic situation is grave. Figures released Friday by the Russian State Statistics Committee said food production declined by 9 percent in 1991, while output of consumer goods dropped between 2 percent and 6 percent. Meanwhile, prices have jumped more than 400 percent since June, and the Russian worker's average monthly salary of about 400 rubles cannot cover the cost of maintaining a minimal standard of living, the report added.

In addition, the Russian Employment Committee said the economic collapse may leave up to 8 million people jobless by October.

Despite the bleak economic news, Mr. Yeltsin and the government remain committed to reforms. But dissatisfaction with the government's performance is growing. Trade union officials say the government isn't doing enough to protect workers' welfare, while entrepreneurs claim they are suffocating because of high taxation and customs duties.

And a recent report prepared for Yeltsin said a wide range of political and social forces, including the military-industrial complex and "underground regional committees of the Communist Party," are working to sabotage reforms, according to the Nezavisimaya Gazeta newspaper.

Their "purpose is to topple the government as quickly as possible and replace it by politicians suiting the old bureaucracy," the newspaper said, referring to the opposition.

Strained relations with Ukraine are complicating the Russian government's reform efforts, as little progress has been made in resolving a dispute over control of the Black Sea Fleet. As long as the dispute remains unsettled, the West may be reluctant to pour more aid into commonwealth reforms, some experts say.

Late last week the Russian parliament raised the stakes in the dispute by calling for a review of the 1954 transfer of the Crimea from Russian to Ukrainian jurisdiction. Ukrainian officials have strongly denounced the Russian parliament's action, saying the territorial move was approved by the legislatures of both republics. But over the weekend, Ukrainian Prime Minister Vitold Fokin sounded a reassuring note, saying Yeltsin did not favor any attempt by Russia to reclaim the Crimea, where the Black Sea F leet has its headquarters.